Statistics 112

The following data were derived from a sample survey of CEOs of major multinational corporations. The dependent variable (Y) shows the total FY 2006 compensation received by twenty of these corporate executives, in Thousands of Dollars.

Other recorded variables were Profits as a Percent of Total Revenues (X1); the FY 2006 Percent Increase in the Price of the Stock (X2); the FY 2006 Price-Earnings Ratio (X3); the Competitive Position of the Company (X4) [where "1" indicates "highly competitive market place" and "5" indicates a virtual "oligopoly" with control by a few companies; the scale is 1 to 5]:

1. Run a regression equation for Y as a function of these 4 independent variables
   Which independent variables are statistically significant at alpha = .05?
2. Re-run a regression with only the independent variables X2 and X3.
3. Using the three important indicators of fit, compare these two equations.
4. Now run a regression with X2, X3, the cross product of X2 and X3, and the squares of X2 and X3.

5) Are all of the coefficients of the complete equation statistically significant? If not, remove the insignificant term(s) and re-run the problem.

6) Now compare the final result of step 5) with the equation from step 2), and, using the three important indicators of fit, compare and contrast these two equations in words.

7) In layman's terms, what is the final equation in step 5) telling us?

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Solution: The downloadable solution consists of 7 pages, 575 words.
Deliverable: Word Document